529 plan projection calculator

529 plan math — compound growth vs tuition inflation

Two opposing exponentials race over your child's lifetime:

1. Your contributions compounding at expected market return (~6-7% real-equivalent)
2. Tuition inflating at 4-6%/year (above general CPI for the last 30 years)

The gap between these two rates is what your monthly contribution has to close. Tuition has historically inflated at 4.5-5.5%/year — fast enough that "saving for college" requires aggressive investment growth, not just savings.

Plan structure

• Tax treatment: contributions made with after-tax dollars; growth and qualified withdrawals tax-free for federal (some states give a deduction for contributions to in-state plans)
• Account ownership: typically parent or grandparent (parent-owned has minor FAFSA impact, ~5.6% of balance counted as parent assets)
• Beneficiary changes: can be reassigned to siblings, cousins, even self
• Non-qualified withdrawals: 10% penalty + tax on gains (no penalty on principal)

What "qualified" covers

• Tuition (any accredited college, US or foreign-eligible)
• Fees, books, required supplies
• Room and board (if enrolled at least half-time)
• K-12 tuition (up to $10k/year, federal — state rules vary)
• Apprenticeship programs
• Up to $10k of student loan principal per beneficiary (lifetime, post-SECURE Act)

Risk: over-saving

If the beneficiary doesn't go to college (or goes to a cheaper one), excess funds either:

• Reassign to another beneficiary (sibling, relative, eventually grandchild)
• Withdraw with 10% penalty + tax on gains
• New: roll over to Roth IRA in beneficiary's name (up to $35k lifetime, account must be 15+ years old, SECURE 2.0 rule)

The Roth-rollover provision largely eliminated the over-save risk. As long as you don't go wildly above projected need, the 529 is rarely "wasted."

The age-based fund choice

Most 529 plans offer age-based portfolios that automatically shift from equity-heavy to bond-heavy as college approaches. Use them unless you have a strong reason to override. They handle the glide-path so you don't have to.